Counterparties: Not so golden, still delicious
Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.
Apple’s stock is down 23% in the last six months. Last week’s earnings report caused an overnight drop in shares from $514 to $461. Earnings growth is decreasing. Investor Jeff Gundlach thinks it’s a “broken company” where innovation has been reduced to “just changing the size of… products”. Fast Company explains “Why Apple is losing its aura” while the WSJ asks “Has Apple Lost its cool to Samsung?”
Not so fast. Legendary VC Michael Moritz, who first bought Apple equity in 1978, has stepped into the doomsaying to decry the lack of “any sense of perspective”. Quarterly revenues, he notes, grew 18%, and topped $50 billion for the first time. And while Apple does face stiff competition, it’s only because it is so successful:
Almost every company in the world suffers from acute Apple envy. Apple has thrown several mainline industries, including music, movies, television, publishing, cameras and 35mm film, into convulsions… It is difficult to think of a company of the past 50 years whose influence and ingenuity have been as profound or widespread.
John Abell voices the nagging concern that Apple just doesn’t tell shareholders enough about what it’s up to. That’s really nothing new: Steve Jobs was notoriously hostile to shareholders, and seemed to relish ignoring them. Tim Cook hasn’t changed tack.
It’s not just more information some Apple shareholders want — they’d like management to be fixated on the stock price. In practice, that seems to mean a monomaniacal preference for buybacks as far as they eye can see, rather than investments in product development or the company’s supply chain. But Apple’s view on this issue won’t change: Jobs ignored Warren Buffet’s advice to use cash to buy back stock.
The difference between a CEO obsessed with products and an investor obsessed with finance, is the difference between Apple and Berkshire Hathaway. In turn, that might help explain why, as Farhad Manjoo writes, “the market attitude toward Apple seems unmoored from its actual performance”. — Ben Walsh
On to today’s links: